Equity risk ticks-up in the US, Canada, Japan and Australia; Asset correlations climb in the US; Mexican peso strengthens against the US dollar
AXIOMA RISK MONITOR
MULTI-ASSET CLASS EDITION

Bond yields rebound as virus fears ebb
Dollar surges on revived risk appetites
Portfolio risk soars as share prices rally

 

HIGHLIGHTS FOR THE WEEK ENDED FEB 7

 
 

Bond yields rebound as virus fears ebb

 

Global government bond yields rebounded in the week ending February 7, 2020, as share prices in the United States recorded their biggest weekly gain in eight months. American blue-chip indices recovered the losses of the previous two weeks and rose to yet higher heights, after reports that the People’s Bank of China would step in to shield the country’s economy from effects of the coronavirus outbreak. This was followed by an announcement from Beijing that it would halve tariffs on some imports from the US, as part of the “phase one” trade agreement between the two countries.

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Please refer to figure 4 of the current Multi-Asset Class Risk Monitor (dated February 7, 2020) for further details.

 


Dollar surges on revived risk appetites

 

The US dollar appreciated 1.33% against a basket of its major rivals in the week ending February 7, 2020, as investors shifted funds back into riskier assets. The so-called Dollar Index posted its strongest weekly return since April 2018, with gains across almost all G10 currencies. The British pound experienced the biggest loss of 1.9%, as both the UK and the European Union braced for tough negotiations ahead, after Britain officially left the bloc on January 31. The move resulted in an increase in short-horizon exchange-rate risk, with the predicted volatility for GBP/USD rising to 7.43%.


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Please refer to figure 6 of the current Multi-Asset Class Risk Monitor (dated February 7, 2020) for further details.

 


Portfolio risk soars as share prices rally

 

Short-term risk in Axioma’s global multi-asset class model portfolio soared 0.70% to 4.92% as of Friday, February 7, 2020, as standalone equity volatility jumped by 4.5 percentage points to 12.5%, amid the global stock-market rebound. The rise in total risk was mostly reflected in the three equity buckets, which saw their joint share of overall volatility surge by a combined 26%. However, much of this was offset by an opposing motion for the fixed-income assets in the portfolio, all of which now actively reduce overall risk, except for the high-yield category. The co-movement of the US dollar with the stock market was so strong amid the returning risk appetites that most foreign-currency assets now also decrease total portfolio volatility, as all other currencies depreciated against the greenback.


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Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated February 7, 2020) for further details.



 
 
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Webinar | Qontigo Insight™ Quarterly Multi-Asset Risk Review

Date: February 18, 2020
Time: 11:00 AM (ET) | 4:00 PM (GMT)

Join Christoph V. Schon, Qontigo’s Executive Director of Applied Research, in this webinar to hear how this apparent disagreement between the two major asset classes affected portfolio risk and diversification opportunities.

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Date: April 2, 2020

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Qontigo's ROOF Scores were created to quantify market sentiment — bullish or bearish? ROOF is an acronym for Risk-On/Risk-Off market conditions; the Scores are calculated from the factor returns to eight style factors from Axioma’s fundamental factor risk models, plus two indicators of changing market volatility. 



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